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3. M/s. Gimpex Ltd. are engaged in the export of industrial minerals like iron ore, bentonite, feldspar, granite slabs etc. The raw material/machinery required for export of the said goods are packing materials like PP bags and machines like dozers, dumpers, generators, excavators, tippers, crushing and screening systems, etc. GL had exported iron ore fines valued at Rs.142.3 crores and other minerals valued at Rs.31 crores totalling to Rs.173.3 crores during the period from 01/04/2004 to 31/03/2005. These exports helped GL attain sufficient incremental growth when compared to the exports made in the previous year (2003-04), to make them eligible for duty credit certificates under Target Plus Scheme (TPS) for a total amount of Rs.7,08,12,793/-. GL applied in the prescribed format to the Director-General of Foreign Trade (DGFT) for grant of such certificates and obtained 7 such certificates for a total amount of Rs.7,08,12,793/- in the month of May, 2006. These duty credit certificates/licences under TPS, which were granted by the Joint DGFT, Chennai, enabled GL to import canalized items as per para (3.2.5.) of the Handbook of Procedures (Volume-I) 2004-09 and subject to actual user condition. The Conditions Sheet attached to each certificate/licence specified two export product groups viz. CHEMICAL AND ALLIED PRODUCTS and ENGINEERING PRODUCTS and also carried an endorsement: Import will have broad nexus. As these licences were registered at Chennai Port Customs and GL wanted to make imports through ICD Hyderabad, they obtained Transfer Release Advices(TRAs) from Chennai Customs for imports through ICD Hyderabad. GL used these TRAs for importing continuous cast copper rods (a canalized item) (hereinafter, also, referred to as c.c. copper rods) in 14 consignments (total weight 427.383 MTs and value Rs.13,53,94,741/-) through ICD Hyderabad during the period from September, 2006 to April, 2007 [These imports were made under High Sea Sale Agreements concluded between GL and M/s. MMTC Ltd.]. Notification No.32/2005-Cus dt. 08/04/2005 issued by the Central Government under the TPS in terms of paragraph (3.7.) of the Foreign Trade Policy (FTP), 2004-09 granted full exemption from payment of basic customs duty and additional customs duty (CVD) on goods imported into India against duty credit certificates/licences issued under the TPS. Any inputs, capital goods (including spares, office equipments etc.) and agricultural products, which were freely importable under the FTP, could be imported duty-free under the Notification subject to actual user condition. GL claimed this benefit of exemption in respect of the c.c. copper rods imported by them, and the relevant Bills of Entry were accordingly assessed and the goods allowed to be cleared without payment of duty. Subsequently, the DRI launched investigations into the manner in which GL had availed themselves of the benefit of TPS. The relevant documents related to the purchase of c.c. copper rods by GL from MMTC under High Sea Sale Agreements, import documents related to duty-free clearance of the goods under TPS, documents related to export of iron ore fines and other goods, correspondence between GL and MMTC and others, etc., were recovered and scrutinized by the DRI. Statements were recorded from functionaries of M/s. Gimpex Ltd., M/s. Mangalchand Alloys and Refineries Pvt. Ltd. (MARPL), M/s. Shah International Travels (CHA) and others under Section 108 of the Customs Act. The relevant provisions of the FTP, 2004-09 and of the Handbook of Procedures (Volume-I) were examined. The provisions of Customs Notification No.32/2005 dt. 08/04/2005 were also examined. On the basis of the results of investigations, the Department issued a show-cause notice to GL and others (a) denying exemption under the above notification in respect of the imported copper rods and demanding duty under the proviso to Section 28(1) of the Customs Act, (b) holding the said goods liable to confiscation under Section 111(o) of the Act and holding GL liable to penalty under Section 114A of the Act, (c) demanding interest on duty under Section 28AB of the Act, and (d) proposing penalties on other noticees S/Sh Samir Goenka, Anil Goyal and Ranjit S Chaudhari under Section 112 of the Act. The demands and other proposals were contested. In adjudication of the dispute, the Commissioner of Customs passed order-in-original No.7/2009. The operative part of this order reads as follows:

(i) The benefit of exemption in terms of Notification No.32/2005-Cus. Dt. 8/4/2005 as amended in respect of the Copper rods imported by M/s. Gimpex Ltd. against the duty credit certificates issued under Target Plus Scheme vide Bills of Entry mentioned in Annexure A.17 of the show cause notice is denied.

(ii) An amount of Rs.3,95,68,820/- (Rupees three crores ninety five lakhs sixty eight thousands eight hundred and twenty only) towards duties of Customs not paid on the quantities of copper rod imported by them during the period from September 2006 to April 2007 should be paid by them in terms of proviso to Section 28(1) of the Customs Act, 1962 read with provisions of Customs Notification No.32/2005-Cus. Dt. 8/4/2005 as amended. An amount of Rs.75 lakhs voluntarily paid by M/s. Gimpex Ltd. is adjudged against the above amount of duty of Customs.

(i) The benefit of exemption in terms of Notification No.32/2005-Cus. Dt. 8/4/2005 as amended in respect of the Copper rods imported by M/s. Sree Enterprises against the duty credit certificates issued under Target Plus Scheme vide Bills of Entry mentioned in Annexure A.44 of the show-cause notice is denied.

(ii) An amount of Rs.1,50,47,618/- (Rupees one crore fifty lakhs forty seven thousand six hundred and eighteen only) towards duties of Customs not paid on the quantities of copper rod imported by them during the period from June 2006 to September 2006 is demanded in terms of proviso to Section 28(1) of the Customs Act, 1962 read with the provisions of Customs Notification No.32/2005-Cus. Dt. 08/04/2005 as amended.

19.3. The Target Plus Scheme itself was short-lived when compared to other export promotion schemes. The clarificatory Circulars/Public Notices issued by the DGFT during the short tenure of the scheme, apparently, could not eliminate the ambiguities of its provisions. In particular, the meaning of broad nexus given in para (3.2.5.) of the Handbook of Procedures (Volume-I), 2004-09 lacked clarity and left room for conflicting interpretations. Para (3.7.6.), which allowed duty credit to be used for import of any inputs, capital goods  provided the same is freely importable under ITC(HS) for their own use  did not improve the situation. Suffice it to say that the language of the Policy provisions pertaining to the Target Plus Scheme provided scope for divergent interpretations of broad nexus. The Customs authorities sought to restrict the meaning of broad nexus to the extent of taking the view that this expression meant that an input imported under the TPS should be one which could be used in the manufacture of the exported product. On the contrary, the importers wanted to stretch the meaning of broad nexus to the other extreme. The Honble High Courts of Delhi and Bombay got occasion to interpret the Policy provisions, and the Circulars/Public Notices in question came to be struck down. Having outlined the chequered history of the Target Plus Scheme, we must accept that the ambiguous TPS provisions made the assessees believe bona fide that they were entitled to claim the benefit of Notification No.32/2005-Cus in respect of the c.c. copper rods imported by them, and they did not have any intention to evade payment of duty. Therefore, the extended period of limitation was not invocable against them. In the result, the demands of duty raised on the assessees are liable to be set aside on the ground of limitation and the penalties imposed on them under Section 114A of the Customs Act are also liable to be set aside.